Financially strapped Harry & David Holdings has put a management-retention plan into place, setting aside a total of $605,000 for key personnel.

By Greg Stiles

Financially strapped Harry & David Holdings has put a management-retention plan into place, setting aside a total of $605,000 for key personnel.

The plan, adopted Feb. 24 and revealed in a Securities and Exchange Commission filing Wednesday, includes executive officers and "other key employees" but does not cover former Chief Executive Officer Steve Heyer, who remains the company's chairman, or board members.

According to the filing, selected employees will receive a one-time cash payment ranging from 13 percent to 29 percent of their base salary.

Such payments, however, could be forfeited or returned to the company if the executive or manager is fired or leaves "other than for good reason." It was not clear when the payments would be made or to which executives.

"The point of such a plan is to give key employees a reason to stick around," said Dave Baca, a corporate securities partner with Davis Wright Tremaine in Portland. "Whether you're talking Chapter 11, a sale or restructuring of some kind, it has the same effect. Nothing will cause your best employees to leave faster than a sinking ship and they are wondering where their next paycheck will come from."

Among executives enumerated in previous SEC filings, Chief Financial Officer Edward Dunlap received a base salary of $336,080 in fiscal 2010, Executive Vice President of Operations Peter Kratz received a base salary of $358,436 and Chief Brand Officer Ross Klein's base salary was $116,077. The Medford-based gourmet food and gift company said in January that it had fallen behind in paying its vendors and other creditors and would not be able to borrow on its line of credit. Subsequently bond-rating agencies indicated the company was in danger of defaulting on $7 million in bond interest payments due March 1. There has been no word as to whether payments were made or if bondholders negotiated a new deal.

In mid-February the company laid off close to 100 employees in Medford, at its satellite facility in Hebron, Ohio, and at retail operations across the country. There have been published reports of Harry and David retail stores closing in shopping malls since the beginning of 2011. At the end of 2010, there were 122 stores, but that number is expected to be cut in half as early as this month.

In late February, Heyer relinquished his CEO role to restructuring veteran Kay Hong.